Consumer Finance Insights
December 29, 2014

For Removal, Less is More: Supreme Court Clarifies Requirements for CAFA Removal Notices

As we have previously opined, the decision of whether to remove a case can be critically important in state-court-filed class actions. Despite the importance of this decision, the time afforded defendants to weigh their options—thirty days—is minimal.  In that short time, defendants must weigh the costs and benefits of both the original and potential jurisdiction.  Additionally, defendants considering removal find themselves asking how much time and how many resources they are willing to spend to determine whether the Class Action Fairness Act’s (CAFA) jurisdictional threshold is met.  When the legal standard regarding the amount of information needed to remove a case is unclear, it is very difficult for defendants to fully evaluate the potential cost of removal.

Recently, however, the Supreme Court simplified that part of the analysis.  In Dart Cherokee Basin Operating Co., LLC v. Owens, the Court held that all that is required in a notice of removal is a “short and plain statement” setting forth “a plausible allegation that the amount in controversy exceeds the jurisdictional threshold.” Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S.         , (slip op., at 5-6) (2014). In Dart, the plaintiff filed a putative class action in Kansas alleging “underpa[yment] of royalties owed . . . under certain oil and gas leases.” Id. at 2.  Dart calculated the alleged underpayments at more than $8.2 million, and removed on that basis.  Id.  In response to the plaintiff’s motion to remand, Dart provided a declaration of one of its executives supporting its calculation, and asserting that the amount in controversy was, in fact, over $11 million.  The United States District Court for the District of Kansas found that Dart’s notice of removal was inadequate because it lacked evidence and that the declaration provided in response to the plaintiff’s motion to remand could not support the removal because it was not included in the notice.  On these two findings, the District Court reversed. The Tenth Circuit denied review.

Faced with the question of whether evidence was required to support an alleged amount in controversy in a notice of removal, the Supreme Court answered no: “A statement, ‘short and plain’ need not contain evidentiary submissions.”  Id. at 2.  In support, the Court looked to legislative intent, finding that Congress clearly intended to require only a short and plain statement like that required by FRCP 8(a) and that Congress intended only that the defendant allege the threshold requirements were met.  Id. at 5-6.  Moreover, the Court looked to the structure of CAFA itself.  It found that the language of the Act only requires a removing defendant to provide evidence when the plaintiff challenges the defendant’s allegations.  Id. at 6.  Finally, in response to the assertion that a presumption against removal exists, the Court noted in dicta that “no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudications of certain class actions in federal court.” Id. at 7.

To be clear, Dart does not allow defendants in state-court-filed class actions to remove without determining that a basis for removal exists.  It is certain that some level of investigation will be required to determine that the threshold requirements for removal are met.  Given Dart’s reliance on Congress’s decision to borrow pleading language from Rule 8, the principles underlying the Court’s decisions in Iqbal and Twombly—in short, plausibility and factual allegations—likely also apply to allegations in removal actions.  And, in any event, by signing the notice of removal, an attorney is representing to the court that, among other things, “the factual contentions are warranted on the evidence.”  See Fed. R. Civ. P. 11.  Nevertheless, Dart’s clarification of what a removing defendant must do to remove is extremely valuable because it better allows defendants to evaluate the time and resources needed to meet the pleading requirements for removal.